Can car dealer request Social Security number if I'm not financing through them?

October 25, 2012 23:42 by Consumer Ed

Dear Consumer Ed:

I went to a dealership to buy a car, and the business manager was pressuring me to let him check my credit to get better financing terms than my credit union was offering.  I refused because I am happy with my credit union financing.  I got the buyer's order to take to my credit union to get the check to make the purchase, but the dealer told me that once they had the check and before I drove the car off the lot, I would have to give them my Social Security number.  They gave me a blank credit application to put it on.  They said they needed it to verify my identity, and if they did not check they could lose their license.  I told them that if my credit union was giving me a check to purchase the car, that should be assurance enough that I am who I say I am.  I have already given them my Georgia driver’s license.  Is this legal?         

Consumer Ed says: 

Car dealerships must fulfill a number of requirements in order to avoid penalties; however, looking for identity “red flags” after the customer has retained financing from a third-party is not one of them.  What the car dealership must do is file a Notice of Security Interest with the State of Georgia within 20 days of your purchase to inform the State about the financing involved with this sale. This notice requires minimal information about the purchaser of the vehicle, all of which can be found on your driver’s license.  Accessing a credit report in connection with a credit transaction involving the consumer is permitted under the Fair Credit Reporting Act; however, because you had already obtained credit from another source and didn’t apply for credit through the dealership (in fact, specifically expressed your wish not to do so), the dealer wouldn’t have had a legitimate reason to run your credit history.

Based on your description of your interaction with the car dealership’s business manager, this dealership might be in violation of the Georgia Fair Business Practices Act (“FBPA”).  The FBPA prohibits unfair and deceptive acts or practices in the marketplace.  For example, if the business manager says that he needs your social security number for a “required” background check, but it turns out that this background check is a pretext for finding and offering you alternative financing through the dealership, this act might be considered unfair and deceptive.

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Payday loan offer - is it a scam?

October 10, 2012 00:32 by Consumer Ed

Dear Consumer Ed: 

I got a call from a man in Washington, D.C. who said he was with a payday loan company, telling me that I had received a loan for $1,000.   He gave me a confirmation number and told me I had to call his senior loan manager in order for the loan to go forward.  He then told me I had to pick the money up at a Western Union.  I declined, but am interested to know if this is legit.

Consumer Ed says: 

Almost certainly it is not.  At best, the phone call is likely just a scheme for the caller to make contact with you in order to sell you a loan or other product; at worst, it is a scam designed to get you to give over personal financial information so that the caller can then steal your money, commit identity theft, or both.

It is very unlikely that you actually have been approved to receive a payday loan because payday loans – indeed, all loans – require some sort of application and credit check, and you did not submit an application or take any other steps to apply for the loan.  What’s more, payday loans are generally illegal in Georgia.  So, a legitimate business would not attempt to contact any Georgia consumer about a payday loan.

According to Georgia law, it is illegal for someone to represent that a person has been selected to receive something when in fact the purpose of the call is really to make contact with prospective clients.  It is also unlawful to represent that a consumer has been “pre-approved” for a loan and then inform the consumer that he or she has to meet additional conditions in order to get the loan.

Another indication that this phone call is not on the up-and-up is the fact that the caller is a stranger, reaching you by phone, and asking you to use Western Union.  As a general rule, you should never give a stranger your bank account information, Social Security number or full name and address over the phone.  The use of Western Union is especially suspicious.  Legitimate lenders will not ask you to use Western Union.  Western Union is really meant for wiring cash quickly, such as to a family member who urgently needs it, but not for use with strangers.  That’s because wiring money is like sending cash; once it is sent, you can’t stop the transfer and get your money back. This makes Western Union quite appealing to scammers who want to take your money and remain anonymous.

The phone call you received may well have been an “Advance-Fee Loan Scam”.   It is likely that after discussing your supposed loan with the “loan manager”, he or she would ask you to pay some kind of up-front fee through Western Union. Remember that if you have to wire money in order to receive a loan or credit card, it’s a scam. 

Some tips you can use to avoid scams like this:

•    Only send money to people you personally know and trust;
•    Never provide your banking information to unknown individuals or businesses‎;
•    Never send money in advance to obtain a loan or credit card

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Defaulted student loan

September 21, 2012 23:47 by Consumer Ed

Dear Consumer Ed: 

I have paid on a defaulted student loan for three years, but it is not reflected on my credit report.  The collection agency is requesting an additional $50 a month for a Rehabilitation Program in hopes that my loan will be purchased by another lender, this in addition to the $500 a month that is being garnished from my payroll check.  My payments so far total $13,585.47 with the collection company receiving $2,248.78.  My loan interest rate is 2.4% on one of the loans and 3.52% on the other; the collection agency is collecting 15%, and tells me that this will increase to 18.5% once a lender is found.  Is there any way I can have the garnishment removed, and am I still required to pay the collection agency even though my loan will be back with a lender?  If so, why would I still have to pay the collection agency if my loan is out of default?

Consumer Ed says: 

You should try to make regular payments on your loans on top of the money that is garnished from your payroll check every month.  While it’s wonderful that some of your loans have been paid off through wage garnishment, the loans will actually remain in default until you either pay them off in full, consolidate them through an approved lender, or complete a loan rehabilitation program.  If you remain in default, your credit report will not improve until the item expires, and your wages can be garnished until you’ve paid the rest of your loans in their entirety.

First, however, it’s important to confirm that your loans are from the U.S. Department of Education (DOE).  The most common loans people receive from the DoE are Direct Loans, FFEL Loans, or Perkins Loans.  If you’re not sure what type of loans you have, you can look them up through the National Student Loan Data System (www.nslds.ed.gov).  If you can’t find information about one or both of your loans on this system, your student loans are likely with a private lender.  You can find out more about some of the most popular private student loan programs by visiting www.finaid.org/loans/privatestudentloans.phtml/.
 
Based on the fact that your wages are being garnished and you’ve been encouraged to participate in a loan rehabilitation program, it sounds like your loans are from the DOE.  When a borrower goes into default, the DOE commonly hires specific collection agencies to collect those student loans (for a list of these agencies, visit www.myeddebt.com/borrower/myoptions_collectionAgencies).  The DOE (or collection agency hired to collect your loan) probably initiated the Administrative Wage Garnishment (AWG) process. Before any garnishment began, you should have received a notice of garnishment, giving you the opportunity to request a hearing before officially entering into AWG.  If you have any questions about this process you can either call 1-800-4-FED-AID, or visit https://www.myeddebt.com/borrower/.  Once selected for AWG, your employer is required to withhold up to 15% of your disposable pay. 
   
Loan rehabilitation is an option you should consider, because once you’ve completed this process, your default will permanently be removed from your credit report.  While the exact process varies depending on what type of loan you have, generally, you must make nine on-time monthly payments, and then the collection agency that is currently assigned your loan will sell it to a lender.  It’s important to note that involuntary payments, such as wage garnishments, don’t count towards completion of the rehabilitation process.  (This would also be why you haven’t seen these payments reflected on your credit report.)  Once you complete rehabilitation, you’ll no longer be in default, the default status will be removed from your credit report, and your employer will stop garnishing your wages. For more information about rehabilitation options, visit https://www.myeddebt.com/borrower/myoptions_rehabilitate.

Once you’re out of default, you’ll need to continue making payments to your new lender.  Your monthly payments after rehabilitation might be more than what you paid during the rehabilitation period, in part because collection costs and interest that were outstanding at the time of rehabilitation may be added onto the total amount that you owe. 

If you’re having problems with the collection agency handling your default, you should file complaints with the Department of Education, the collection agency, and with the Office of the Inspector General.  To file a written complaint with the Department of Education, you should send a letter and copies of any communications between you and the collection agency to:
   
    Chief of Contract Analysis and Compliance
    US Department of Education
    61 Forsyth Street, SW 19T89
    Atlanta, GA 30303

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